The Many Inefficiencies of Real-Time Bidding

Current inefficiencies of RTB
Imagine for a second that you are on the main floor of the New York Stock Exchange as the market opens. Papers are flying, phones are ringing off the hook, and traders are clamoring to cut deals as fast as they can. This is an example of real-time bidding in the financial sector. Stock brokers use the present information they have on hand, based on data and news collected from around the world, to buy and sell stocks instantaneously.
A similar concept of real-time bidding applies to the mobile ad market.

What is Real-Time Bidding? (RTB)

Real-time bidding is defined as a process in which advertising inventory is bought and sold on a per-impression basis, via programmatic instantaneous auction. Basically, when a mobile phone user sees a pop-up ad within an app or on a website, that ad got onto their screen by winning a RTB auction.
In terms of mobile advertising, the bidding group is the advertiser and the app publisher is the auctioneer. That said, mobile advertisers only pay a publisher for displaying their ad if the end user actually clicks on the advertisement.
In order to determine which ad wins a RTB auction, developers consider two primary variables: 1) the price of the bid and 2) the location of the user. The goal is to display ads that are both relevant and high-paying in order to maximize profit. However, traditional RTB practices have been exposed as inefficient recently and this is why.

Inefficiencies of Real-Time Bidding Practices

Traditional mobile advertising is inefficient because the calculations that publishers make to decide which ads to display are incomplete. According to software developer and CEO of AdAbouts Richard Sylvester, “the largest problem we see is the fact that all RTB servers work by returning the highest bid.” Of course, awarding ad exposure to the highest bidder makes sense, if payment were guaranteed. But remember, publishers only receive payment if a user clicks on a displayed advertisement. Therefore, the price of an ad must be weighed against the probability of converting the ad into a click from the user.
Sylvester goes on to explain this concept with the following example scenario:

“[A] bidder has an ad that is simply a white box with nothing inside of it. The bid payout for this ad is $0.50 if clicked.

Another bidder that was outbid by the above ad was for coffee while the end user was at a bookstore. The bid was only $0.30 if clicked.

Assuming the white box has a click through rate (CTR) of 0.1% due to curious people and accidental clicks this equates to an eCPM of $0.50 for 1 click per thousand impressions.

Now assume the second ad won. It could have a much higher CTR of, say, 5% due to its relevancy. Based on this CTR the developer would have an eCPM of $15 for the 50 clicks at $0.30 cents.”

The above example is dramatic, but it clearly shows the issue with traditional RTB practices. To summarize, the highest bid is not always the most profitable. This means that publishers should take relevancy into account when deciding which ads to display in their apps.

Enhanced Real Time Bidding

AdAbouts turns the tables on RTB by focusing on ad relevancy rather than the price of a bid.

The Efficiency of AdAbouts

AdAbouts turns the tables on RTB by focusing on ad relevancy rather than the price of a bid. This philosophy is important because, as the example above shows, revenue is about click through rate, not necessarily bid price. To maximize CTR and generate the most revenuefor both developers and advertisers, AdAbouts improves upon the two traditional variables associated with RTB (price and location).
First, AdAbouts is revolutionary in that it condenses multiple ad networks into one program for easy comparison. So, instead of taking bids from advertisers in succession, AdAbouts simultaneously receives bids from all interested advertisers. Resultantly, greater transparency and competition leads to higher bids.
Secondly, AdAbouts uses a different type of location data gathering software called Location 2.0 Technology (patent pending). Whereas traditional RTB location data focuses on geographic coordinates, Location 2.0 focuses on the immediate environment of the mobile phone user. In the example above, AdAbouts would deduce that the user is inside of a bookstore, a fact that makes a coffee ad more relevant.
Thirdly, AdAbouts measures and monitors ad content over time and applies a Value Score to the advertisers content which measures relevancy and effectiveness in determining which bid wins the AdAbouts Enhanced Real-Time Bidding auction.
The result of these three tactics is advertisements with more relevance to each individual user which equates to more clicks which leads to more profit.

Win At RTB with AdAbouts

Real-time bids for mobile advertisements are placed billions of times a day across the globe. For a publisher, the potential difference in revenue that can be obtained by using AdAbouts advanced metrics is staggering. And for advertisers, the increase in ad impressions can be equally as steep. Take it from AdAbouts developer Richard Sylvester, “The highest bid doesn’t always win, the most relevant ad does.”
AdAbouts is the future of mobile advertising, and, in the future, everyone wins.